State Bank of India mulls repo-linked home loans for existing borrowers

Kolkata: State Bank of India said it is contemplating extending the benefit of the repo-linked lending rate to the existing home loan borrowers while hoped for better traction in consumer demand in the second half of the fiscal expecting the government to offer fiscal stimulus.

The country's largest bank has introduced repo-linked lending rate for home loans from July only for new customers who are getting the direct benefit of lower policy rates.

"We are examining this," SBI Chairman Rajnish Kumar said, responding to ET's query on weather the benefit of repo-linked loans would be passed on the existing borrowers as well.

When banks introduced marginal-cost based lending rate in 2014, every bank offered existing borrowers the option to switch over from base-rate linked loans to MCLR-linked loans.

SBI's repo-linked lending rate (RLLR) has a 2.25% mark-up over the repo rate, which is 5.40% at present. So right now, RLLR is 7.65%. Then there is a spread of 40 basis points and 55 bps above the RLLR. So, new borrowers can avail themselves of homes loans from SBI at 8.05% or 8.20% per annum. One basis point is equal to one-hundredth of one percent.

The bank's lending rates for home loans linked to MCLR are 8.35% to 8.90% for loans up to Rs 75 lakh. SBI has lowered MCLR by 30 basis points since February while Reserve Bank of India reduced policy rate by 110 bps.

Kumar said the demand for bank credit had remained muted in the first quarter but with the positive impact of monsoon, the demand may say revival in the second half of the fiscal.

"There is no supply side constraints as of now. The banks are capitalised enough, interest rates have moderated while the system has surplus liquidity," Kumar said.

He said that the economy needs stimulus package and the consultation process is going on.

SBI is expecting around 12% growth in loans this fiscal over an outstanding of Rs 23 lakh crore while trying to contain fresh slippages from farm, MSME sectors and retail sectors.

It reported Rs 16000 crore fresh slippages in the first quarter.

State Bank of India